People become so afraid of losing their potential lucrative reward that performance suffers.

We’ve all seen it happen before. It could be our favorite sports team, a critical sales pitch or even a job interview. Some people just choke under pressure. Why? What causes people to choke when the stakes are high? A new study by researchers at the California Institute of Technology (Caltech) suggests that when there are high financial incentives to succeed, people can become so afraid of losing their rich reward that their performance suffers.

But how can that be? After all, you would think that the more people are paid, the harder they will work, and the better they will do their jobs—until they reach the limits of their skills. That notion tends to hold true when the stakes are low, says Vikram Chib, a postdoctoral scholar at Caltech. He is the lead author on a paper recently published in the journal Neuron.

Previous research, however, has shown that if you pay people too much, their performance actually declines. Some experts have attributed this decline to too much motivation: they think that, faced with the prospect of earning an extra chunk of cash, you might get so excited that you will fail to do the task properly.

Money Changes Everything

But now, after looking at brain-scan data of volunteers performing a specific motor task, the Caltech team offers a different – and rather compelling – explanation. They found that what actually happens is that you become worried about losing your potential prize. The researchers also found that the more someone is afraid of loss, the worse they perform.

In the study, each participant was asked to control a virtual object on a screen by moving an index finger that had a tracking device attached to it. The virtual object consisted of two weighted balls connected by a spring. The task was to place the object, which stretched and contracted as a weighted spring would in real life, into a square target within two seconds.

As expected, the team found that performance improved as the incentives increased—but only when the cash reward amounts were at the low end of the spectrum. Once the rewards passed a certain threshold, which depended on the individual, performance began to fall off.

Incentives are known to activate a part of your brain called the ventral striatum, Chib says. The researchers thus expected to see the ventral striatum become increasingly active as they bumped up the prizes. And if the conventional thought were correct—that the reason for the observed performance decline was over-motivation—they would expect the striatum to continue showing a lot of activation when the incentives became high enough for performance to suffer. 

A Surprising Result

What they found, instead, was that when the participants were shown their potential rewards, activity in the striatum did indeed increase with rising incentives. But once the volunteers started doing the task, striatal activity decreased with rising incentives. They also noticed that the less activity they saw in a participant’s striatum, the worse that person performed on the task.

To further test their hypothesis, Chib and his colleagues decided to measure how loss-averse each participant was. They had the participants play a coin-flip game in which there was an equal chance they could win or lose varying amounts of money.

Once the numbers had been crunched and compared to the original experiment, it turned out that the more averse a participant was, the worse they did on the task when the stakes were high. And for a particularly loss-aversive person, the threshold at which their performance started to decline did not have to be very high. “If you’re more loss-averse, it really hurts you,” Chib says. “You’re going to reach peak performance at a lower incentive level, and your performance is also going to be worse for higher incentives.”

“Previously, it’s been shown that the ventral striatum is involved in mediating performance increases in response to rising incentives,” says John O’Doherty, professor of psychology and coauthor of the paper. “But our study shows that changes in activity in this same region can, under certain situations, also lead to worsening performance.”

While this study only involved a specific motor task and financial incentives, these results may well be universal, says Shinsuke Shimojo, the Gertrude Baltimore Professor of Experimental Psychology and another coauthor of the study. “The implications and applications can include any sort of decision making that contains high stakes and uncertainties, such as business and politics.”

May 13, 2012
The Healthy Mind Network 

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The above story contains original content and/or information reprinted and editorially adapted by The Healthy Mind. Material is provided by Caltech and EurekAlerts. 

Image Credit: Zach Klein  

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